Category: Credits

Who can take the Retirement Savings Contributions Credit? (Savers Credit)

If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be eligible for a tax credit, depending on your age and income.

Here are six things the IRS wants you to know about the Savers Credit:

1. Income limits: The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and 2014 income of:

Single, married filing separately, or qualifying widow(er), with income up to $30,000

Head of Household with income up to $45,000

Married Filing Jointly, with incomes up to $60,000

2. Eligibility requirements: To be eligible for the credit you must be at least 18 years of age, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.

3. Credit amount: If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 ($2,000 if filing jointly). The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

4. Distributions: When figuring this credit, you generally must subtract distributions you received from your retirement plans from the contributions you made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.

5. Other tax benefits: The Retirement Savings Contributions Credit is in addition to other tax benefits you may receive for retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.

6. Forms to use: TaxSlayer will provide the necessary calculations based on the entries made inside your tax return.

You may be able to take this credit if you, or your spouse if filing jointly, made:

Contributions (other than rollover contributions) to a traditional or Roth IRA,

Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan,